TEST BANK FOR ESSENTIALS OF INVESTMENTS: 2024
RELEASE BY ZVI BODIE | COMPLETE CHAPTERS|
QUESTIONS AND 100% ACCURATE ANSWERS| LATEST
VERSION.
"Steve is offered an investment where for every $1.00 invested today, he will receive $1.10 at the end of
each of the next five years. Steve concludes that in five years he will have $1.10 for every $1.00 invested
and that this investment will increase his personal value. What is Steveʹs major error in reasoning when
making this decision?
A) He ignores the fact that the costs and benefits of the investment are not stated in the same terms.
B) He ignores the benefits of consuming the $1.00 today against the benefits of consuming the $1.00 five
years from now.
C) He fails to consider the costs of not consuming the $1.00 today.
D) He considers that the value of the cash he may have in the future is the same as the value of cash he
has today. - CORRECT ANSWER=> A) He ignores the fact that the costs and benefits of the investment
are not stated in the same terms."
"A wholesale food retailer is offered $15.60 per two-layer carton for 5000 cartons of peaches. The
wholesaler can buy peaches from their growers at $13.20 per carton. Shipping costs $2.40 per carton, for
the first 1000 cartons, and $1.90 per carton for every carton over that. Will taking this opportunity
increase the value of the wholesale food retailer?
A) No, the costs are $1500 more than the benefits.
B) No, the costs and the benefits are the same.
C) Yes, the costs are $2500 less than the benefits.
D) Yes, the costs are $2000 less than the benefits. - CORRECT ANSWER=> D) Yes, the costs are $2000
less than the benefits."
"What is a competitive market?
A) a market in which goods have a different ask price and bid price
B) a market in which a good can be bought and sold at the same price
C) a market in which a good is sold at a lower price than that for which it can be bought
D) a market in which a good is bought for a lower price than that for which it can be sold - CORRECT
ANSWER=> B) a market in which a good can be bought and sold at the same price"
,"An elderly relative offers to sell you their used 1958 Cadillac Eldorado for $52,000. You note that very
similar cars are selling on the open market for $87,000. You donʹt care for classic cars and would rather
buy a new Ford Explorer for $35,000. What is the net value of buying the Cadillac?
A) $87,000, since the Cadillac could be sold for this price.
B) $52,000, since the Cadillac could be bought for this price.
C) $35,000, since this is the difference between purchase and resale price of the Cadillac.
D) $35,000, since this is the value of the car that you really want to buy. - CORRECT ANSWER=> C)
$35,000, since this is the difference between purchase and resale price of the Cadillac."
"Heavy Duty Company, a manufacturer of power tools, decides to offer a rebate of $130 on its 16-inch
mid-range chain saw, which currently has a retail price $490. Heavy Dutyʹs marketers estimate that, as a
result of the rebate, sales of this model will increase from 60,000 to 80,000 units next year. The profit
margin for Heavy Duty before the rebate is $180. Based on the given information, is the decision to give
the rebate a wise one?
A) No, since costs are $7,800,000 more than benefits.
B) No, since costs are $6,800,000 more than benefits.
C) Yes, since the benefits are $3,400,000 more than the costs.
D) Yes, since the benefits are $7,300,000 more than the costs. - CORRECT ANSWER=> B) No, since
costs are $6,800,000 more than benefits."
"A firm that provides tax services to the public intends to offer a premium tax-return service at a higher
price than their current services. The managers of the company ask experts in marketing
to determine how much an effective ad campaign for such a service would cost, and by how much sales
would increase. They consult experts in economics to calculate the increases in revenue from the
success of the campaign, experts in operations to determine the cost of offering the service, and experts
in strategy to anticipate possible counter-moves by competitors. Which of the following points about the
role of financial managers does this example illustrate?
A) Real-world decisions are complex and require information from many sources if the decisions are to
be valid.
B) Determining the costs associated with making a decision is easier than determining the potential
benefits of the decision.
C) All of the costs and benefits - CORRECT ANSWER=> A) Real-world decisions are complex and require
information from many sources if the decisions are to be valid."
“Which of the following is the overarching principle that a financial manager should follow when making
decisions?
A) Decisions should generate the greatest benefits for the firm.
B) Decisions should provide benefit to the firm without incurring costs.
, C) Decisions should be on behalf of the firmʹs owners that give the greatest benefit to those owners, the
firmʹs employees and the firmʹs other stakeholders.
D) Decisions should increase the value of the firm to its investors. - CORRECT ANSWER=> D) Decisions
should increase the value of the firm to its investors."
"Which of the following statements regarding the cost-benefit analysis is NOT correct?
A) The first step in evaluating a project is to identify its costs and benefits.
B) In the absence of competitive markets, we can use one-sided prices to determine exact cash values.
C) Competitive market prices allow us to calculate the value of a decision without worrying about the
tastes or opinions of the decision maker.
D) Because competitive markets exist for most commodities and financial assets, we can use them to
determine cash values and evaluate decisions in most situations. - CORRECT ANSWER=> B) In the
absence of competitive markets, we can use one-sided prices to determine exact cash values."
"As an oil refiner, you are able to produce $77 worth of unleaded gasoline from one barrel of Alaska
North Slope (ANS) crude oil. Because of its lower sulfur content, you can produce $78 worth of unleaded
gasoline from one barrel of West Texas Intermediate (WTI) crude. Another oil refiner is offering to trade
you 10,150 bbl of Alaska North Slope (ANS) crude oil for 10,000 bbl of West Texas Intermediate (WTI)
crude oil. Assuming you currently have 10,000 bbl of WTI crude, the added benefit (cost) to you if you
take the trade is closest to ________.
A) ($1550)
B) $1550
C) ($3475)
D) $3475 - CORRECT ANSWER=> B) $1550"
"As an oil refiner, you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska
North Slope (ANS) crude oil. Because of its lower sulfur content, you can produce $77 worth of unleaded
gasoline from one barrel of West Texas Intermediate (WTI) crude. Assuming you currently have 10,000
bbl of WTI crude, the added benefit (cost) to you if you were to sell the 10,000 bbl of WTI crude and use
the proceeds to purchase and refine ANS crude is closest to ________.
A) ($1400)
B) $1400
C) ($3908)
D) $3908 - CORRECT ANSWER=> D) $3908"
"As an oil refiner, you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska
North Slope (ANS) crude oil. Because of its lower sulfur content, you can produce $77 worth of unleaded
gasoline from one barrel of West Texas Intermediate (WTI) crude. Assuming you just purchased 9950 bbl
RELEASE BY ZVI BODIE | COMPLETE CHAPTERS|
QUESTIONS AND 100% ACCURATE ANSWERS| LATEST
VERSION.
"Steve is offered an investment where for every $1.00 invested today, he will receive $1.10 at the end of
each of the next five years. Steve concludes that in five years he will have $1.10 for every $1.00 invested
and that this investment will increase his personal value. What is Steveʹs major error in reasoning when
making this decision?
A) He ignores the fact that the costs and benefits of the investment are not stated in the same terms.
B) He ignores the benefits of consuming the $1.00 today against the benefits of consuming the $1.00 five
years from now.
C) He fails to consider the costs of not consuming the $1.00 today.
D) He considers that the value of the cash he may have in the future is the same as the value of cash he
has today. - CORRECT ANSWER=> A) He ignores the fact that the costs and benefits of the investment
are not stated in the same terms."
"A wholesale food retailer is offered $15.60 per two-layer carton for 5000 cartons of peaches. The
wholesaler can buy peaches from their growers at $13.20 per carton. Shipping costs $2.40 per carton, for
the first 1000 cartons, and $1.90 per carton for every carton over that. Will taking this opportunity
increase the value of the wholesale food retailer?
A) No, the costs are $1500 more than the benefits.
B) No, the costs and the benefits are the same.
C) Yes, the costs are $2500 less than the benefits.
D) Yes, the costs are $2000 less than the benefits. - CORRECT ANSWER=> D) Yes, the costs are $2000
less than the benefits."
"What is a competitive market?
A) a market in which goods have a different ask price and bid price
B) a market in which a good can be bought and sold at the same price
C) a market in which a good is sold at a lower price than that for which it can be bought
D) a market in which a good is bought for a lower price than that for which it can be sold - CORRECT
ANSWER=> B) a market in which a good can be bought and sold at the same price"
,"An elderly relative offers to sell you their used 1958 Cadillac Eldorado for $52,000. You note that very
similar cars are selling on the open market for $87,000. You donʹt care for classic cars and would rather
buy a new Ford Explorer for $35,000. What is the net value of buying the Cadillac?
A) $87,000, since the Cadillac could be sold for this price.
B) $52,000, since the Cadillac could be bought for this price.
C) $35,000, since this is the difference between purchase and resale price of the Cadillac.
D) $35,000, since this is the value of the car that you really want to buy. - CORRECT ANSWER=> C)
$35,000, since this is the difference between purchase and resale price of the Cadillac."
"Heavy Duty Company, a manufacturer of power tools, decides to offer a rebate of $130 on its 16-inch
mid-range chain saw, which currently has a retail price $490. Heavy Dutyʹs marketers estimate that, as a
result of the rebate, sales of this model will increase from 60,000 to 80,000 units next year. The profit
margin for Heavy Duty before the rebate is $180. Based on the given information, is the decision to give
the rebate a wise one?
A) No, since costs are $7,800,000 more than benefits.
B) No, since costs are $6,800,000 more than benefits.
C) Yes, since the benefits are $3,400,000 more than the costs.
D) Yes, since the benefits are $7,300,000 more than the costs. - CORRECT ANSWER=> B) No, since
costs are $6,800,000 more than benefits."
"A firm that provides tax services to the public intends to offer a premium tax-return service at a higher
price than their current services. The managers of the company ask experts in marketing
to determine how much an effective ad campaign for such a service would cost, and by how much sales
would increase. They consult experts in economics to calculate the increases in revenue from the
success of the campaign, experts in operations to determine the cost of offering the service, and experts
in strategy to anticipate possible counter-moves by competitors. Which of the following points about the
role of financial managers does this example illustrate?
A) Real-world decisions are complex and require information from many sources if the decisions are to
be valid.
B) Determining the costs associated with making a decision is easier than determining the potential
benefits of the decision.
C) All of the costs and benefits - CORRECT ANSWER=> A) Real-world decisions are complex and require
information from many sources if the decisions are to be valid."
“Which of the following is the overarching principle that a financial manager should follow when making
decisions?
A) Decisions should generate the greatest benefits for the firm.
B) Decisions should provide benefit to the firm without incurring costs.
, C) Decisions should be on behalf of the firmʹs owners that give the greatest benefit to those owners, the
firmʹs employees and the firmʹs other stakeholders.
D) Decisions should increase the value of the firm to its investors. - CORRECT ANSWER=> D) Decisions
should increase the value of the firm to its investors."
"Which of the following statements regarding the cost-benefit analysis is NOT correct?
A) The first step in evaluating a project is to identify its costs and benefits.
B) In the absence of competitive markets, we can use one-sided prices to determine exact cash values.
C) Competitive market prices allow us to calculate the value of a decision without worrying about the
tastes or opinions of the decision maker.
D) Because competitive markets exist for most commodities and financial assets, we can use them to
determine cash values and evaluate decisions in most situations. - CORRECT ANSWER=> B) In the
absence of competitive markets, we can use one-sided prices to determine exact cash values."
"As an oil refiner, you are able to produce $77 worth of unleaded gasoline from one barrel of Alaska
North Slope (ANS) crude oil. Because of its lower sulfur content, you can produce $78 worth of unleaded
gasoline from one barrel of West Texas Intermediate (WTI) crude. Another oil refiner is offering to trade
you 10,150 bbl of Alaska North Slope (ANS) crude oil for 10,000 bbl of West Texas Intermediate (WTI)
crude oil. Assuming you currently have 10,000 bbl of WTI crude, the added benefit (cost) to you if you
take the trade is closest to ________.
A) ($1550)
B) $1550
C) ($3475)
D) $3475 - CORRECT ANSWER=> B) $1550"
"As an oil refiner, you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska
North Slope (ANS) crude oil. Because of its lower sulfur content, you can produce $77 worth of unleaded
gasoline from one barrel of West Texas Intermediate (WTI) crude. Assuming you currently have 10,000
bbl of WTI crude, the added benefit (cost) to you if you were to sell the 10,000 bbl of WTI crude and use
the proceeds to purchase and refine ANS crude is closest to ________.
A) ($1400)
B) $1400
C) ($3908)
D) $3908 - CORRECT ANSWER=> D) $3908"
"As an oil refiner, you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska
North Slope (ANS) crude oil. Because of its lower sulfur content, you can produce $77 worth of unleaded
gasoline from one barrel of West Texas Intermediate (WTI) crude. Assuming you just purchased 9950 bbl
